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Marathon Oil Is Poised to Benefit From Production Growth in U.S.

NEW YORK (TheStreet) -- Marathon Oil's(MRO - Get Report) revenue fell in the second quarter, but a deeper look inside its earnings report reveals that the company is on track to post double-digit growth from its core assets in the U.S.

In announcing its second-quarter results on Monday, Marathon said revenue fell 1.6% to $2.94 billion, partly because of asset sales. But earnings from continuing operations rose almost 50% to $360 million on a 9.1% increase in sales volume from continuing operations, excluding Libya, and on higher oil prices in the U.S.

Furthermore, Commerce Department has recently allowedPioneer Natural Resources(PXD) and Enterprise Product Partners(EPD) to export condensates, a type of ultra-light crude oil. The government had banned all exports of crude oil since the 1970s.

Marathon could benefit from the government's move, because exports may push the U.S. condensate prices higher. That may boost Marathon's earnings, because the company is one of the top condensate producers in the Eagle Ford shale in south Texas.

On a post-earnings conference call, Marathon CEO Lee Tillman has said Marathon will attempt to capitalize on the positive regulatory changes. Although Tillman didn't say that the company has applied for an export license, I believe that will be the next step.

Shares of Marathon have risen 8.5% year to date, compared with a 4.2% gain for the Standard and Poor's 500 Index. The stock was down 1% to $38.48 on Thursday morning.

It trades at 15.5 times last year's earnings, much lower than than the average price-to-earnings ratio of 22.5 of Marathon's peers EOG Resources(EOG), Continental Resources(CLR), Murphy Oil(MUR), ConocoPhillips(COP) and Whiting Petroleum(WLL).

Like other energy companies such as ConocoPhillips, Apache(APA), Devon Energy(DVN) and Hess Corp.(HESS), Marathon has been reducing its exposure to international markets, where it derived 30% of its segment income in the second quarter, in order to focus more on North America.

In June, Marathon Oil announced the sale of its Norwegian assets for $2.1 billion in cash. So far this year, the company has collected $2.2 billion as proceeds from sale of other non-core assets, including oil fields in Angola.